PETER SCHIFF: We're going to have a serious recession and negative interest rates before the election

A
$32,000 2006 Buick Ranier flies off a ramp at 44 mph during a
rollover crash test at General Motors' new $10 million
crash-testing center December 5, 2006, in Milford,
Michigan.Bill Pugliano/Getty
Images

Based on
today's GDP release, it appears that the US economy is
slowing but not near any sort of massive collapse.

Peter Schiff begs to differ.

The CEO and chief global strategist for Euro Pacific
Capital, and
noted perma-bear, said that serious economic destruction is
just a few months away.

"I think the Fed is going to have negative interest rates
before the election because we're going to be in a serious
recession," Schiff told Business Insider on Friday.

In fact, Schiff said that we may already be in recession
and this one is going to be a doozy.

"We're in worse shape now than we were in 2007," he
said.

Chief among his concerns is a growing bubble of debt that
has accumulated in the US, which he said "is even bigger than the
real-estate bubble" that burst in 2008.

He said that there isn't as much debt in the real-estate
sector, but the total sum of debt from student loans, auto loans,
government debt, and the Fed's balance sheet is massive.
According to Schiff, this total is by far bigger than what we saw
before either the housing or tech bubbles.

Once this bubble pops, and Schiff fears that it may already
have, the following recession will force the Federal Reserve's
hand. This will make them pull interest rates into negative
territory, much like the
Bank of Japan's move on Friday.

"The Fed is going to go negative because they want to do
something stimulative to try and boost the economy so the
Republicans — or someone like Donald Trump — don't just walk away
with the election," Schiff told us.

"They're going to blame the downturn on overseas weakness washing
up on our shores to try and convince us that our economy is
alright."

Euro Pacific Capital CEO
Peter Schiff.Reuters/ Rick
Wilking

Now this isn't exactly a new observation for Schiff, who has been
calling
for similar disasters for some time now. (To his credit,
Schiff is one of the people who called the global financial
crisis before it happened.)

The common counterargument to Schiff's pessimism is that while
manufacturing in the US has slowed, American consumer spending
really drives the economy. And
as we learned on Friday, consumption rose 3.1% in 2015, the
most in a decade. Schiff, however, thinks that this isn't as
strong as it seems.

"Most of the growth has been in things like healthcare," he told
us. "It's not that [consumers] are spending more on things they
want, they just have healthcare and they're being forced to pay
more for it."

Schiff added that the only thing helping consumers is low gas
prices, which he says aren't going to stay low forever.